(Updates with executive’s background in fifth paragraph.)
May 28 (Bloomberg) -- Deutsche Bank AG sued to block some of its former wealth-management employees from joining competitor HPM Partners LLC, including two who claim they were forced out after being pressured to sell products that weren’t good for their clients.
The bank accused HPM, a New York-based investment adviser, of inducing more than a dozen members of its asset and wealth- management division to leave “en masse” and “to bring with them DB’s most valuable key clients,” according to a complaint filed yesterday in Manhattan state court. The hirings violated a non-solicitation agreement and previous settlement over HPM’s recruitment of Deutsche Bank employees in 2012, the bank said.
“The unlawful actions by HPM and the employee defendants could best be described as an economic coup d’etat, which seeks to obtain DB’s critical client base as its spoils,” Deutsche Bank said in the complaint.
Benjamin Pace and Lawrence Weissman, who both resigned May 16 and were named in the lawsuit, filed a counter-suit in Manhattan state court claiming they were compelled to leave and pressured to invest clients’ money in the bank’s high-margin, proprietary products, which weren’t in their customers’ best interest.
Pace, a frequent commentator on business television who had worked at the bank for about two decades, was Deutsche Bank’s chief investment officer for wealth management in the Americas. Weissman was a head of portfolio consulting for the bank and reported to Pace.
“Deutsche Asset and Wealth Management’s first priority is to fulfill fiduciary duties owed to clients and we reject the claims made in this complaint,” Renee Calabro, a spokeswoman for the bank in New York, said in reaction to the counter-suit.
Lorraine George-Harik, a spokeswoman for HPM, declined to comment on the cases.
The Frankfurt-based bank has been seeking to add business from rich clients to compete with larger managers such as UBS AG and Credit Suisse Group AG of Switzerland. The asset and wealth management division describes itself as among the 10 largest that are bank-owned in the world, with $1.27 trillion (934 billion euros) under management.
In 2012, HPM hired four former Deutsche Bank managing directors, who took with them more than $550 million in assets, to expand on the West Coast, according to the complaint. A dispute over those hirings was settled after litigation, Deutsche Bank said.
“This time HPM’s raid knows no limits,” the bank said of the more recent moves. Along with Pace and Weissman, eight other employees resigned May 16, according to the complaint. Six more received offer letters at an HPM cocktail party that afternoon and also resigned later, Deutsche Bank alleged.
Under company policies, U.S. employees at vice president level and above needed to provide from 30 to 90 days’ notice before beginning new jobs and weren’t permitted to solicit customers for an additional 120 days, according to the complaint. Former employees who left earlier this month have already begun contacting clients, Deutsche Bank alleged.
The bank is seeking rulings to enforce the policies and recover damages and disgorgement of compensation paid to former employees “during the period of disloyalty.”
Valdi Licul, a lawyer for Pace and Weissman, declined to comment on the lawsuits.
The case is Deutsche Bank Trust Company Americas v. HPM Partners, 651622-2014, Supreme Court of the State of New York, County of New York (Manhattan). The counter-suit is Pace v. Deutsche Bank Securities Inc., 651623-2014, Supreme Court of the State of New York, County of New York (Manhattan).
--With assistance from Zeke Faux in New York.